No kidding

An open letter to Nick Xenophon Independent Senator for South Australia.

Yo, Nick.

Garth here. We share a few things, so I hope you don’t mind the input. You were a small business guy (albeit a lawyer) who got into politics for specific reasons. Me, too. You’re now concerned the people you represent can’t afford houses any more. Ditto. You think the middle class is reasonably screwed. I’m with you there. We tweet. We blog. And, of course, we both fondle goats.

However, Nick, I’m not loving your most recent crusade. In fact, I think you need a better research assistant because you’ve just messed up as far as Canada is concerned. The last thing you Aussies should want to do is slide down the slippery path of encouraging more moist virgins to jump headlong into inflated houses and bloated debt.

I just read this about you, dude:

Independent Senator for South Australia, Nick Xenophon, will introduce legislative changes in the Spring session of parliament to allow first home buyers to access their superannuation savings to pay a house deposit. Such a scheme successfully operates in Canada, called Home Buyers’ Plan, leading to improved housing affordability.

At a Senate Economics References Committee hearing in Adelaide today, the Inquiry heard from HomeStart Finance (an arm of the South Australian Government) outlining the Canadian scheme. In Canada up to $25,000 can be accessed for a first home, and it’s made a dramatic difference for housing affordability there.

However, Senator Xenophon will be moving for changes to Superannuation Act 1976 to allow the release to superannuation funds for a first home, with similar safeguards to the Canadian scheme. In Canada the amount has to be paid back into the super fund within 15 years.

“With more and more Australians finding it difficult to break into home ownership, adopting the Canadian scheme would make a difference to many thousands of Australians each year,” Nick said. Housing affordability in Australia has fallen for the past three decades, as house prices outstrip income growth.

An annual affordability survey by Demographia this year found Australia had the second-worst housing affordability in the world, behind Hong Kong. All 39 Australian housing markets surveyed were “seriously” or “severely” unaffordable, defined as having average house prices more than four times average income.

I confess. Once I thought like you. I even supported realtors years ago when they cooked up this scheme to allow kids to dip into their retirement funds to buy a first home. At the time we were in a steep recession with real estate plunging and the economy in a funk. So, I voted in our Parliament for a temporary program to create the Home Buyer’s Plan in order to stabilize the market and try to revitalize the home-building business. It worked, kinda. Then subsequent governments (a) made the plan permanent and (b) doubled the amount people can suck out of their registered savings.

Now, Nick, we’re reaping the bitter harvest sown when that dumbass legislation passed. Allowing first-time buyers to remove tax-free money to buy a modest home they could not otherwise afford, then restore it to their long-term retirement savings makes perfect sense in theory. In practice and experience, just the opposite.

To date the HBP has been used about 2.5 million times, with roughly $30 billion removed from savings and investments and plowed into real estate. When combined with dirt-cheap mortgage rates (I notice Aussie banks just slashed five-year rates to an all-time low) and voracious, carnivorous bankers, it’s helped push home prices into the clouds. The cost of an average detached house in two of our major cities now exceeds $1 million. (I see median home prices in Sydney rocketed 17% in the past year, to $812,000. So you know what I mean.)

In other words, if you think letting people steal money from their financial futures in order to buy houses today which they really can’t afford is going to make real estate more affordable, you’ve been spending too many evenings with the goat. The opposite is probable. In Canada, it’s fact.

But it gets worse. The evidence also shows when you allow this kind of distorting financial activity to take place, people respond badly. They borrow their brains out, Nicky. Total horniness. As I wrote on this pathetic but repentant blog recently, the kids aren’t even paying this money back – which means we’ve not only goosed houses, increased the risk of a serious correction and skewed the condo economy further – but there are billions less being saved and invested for our pensionless future.

Nick, you need to know this: the latest Canada Revenue Agency stats found almost half (47%) of the borrowers who raided their RRSPs haven’t paid anything back. So the missed payments are added to their incomes and taxed. And why would the virgins be so dumb?

Simple. They don’t have the cash. They borrowed to the max, took advantage of cheap rates and willing bankers, sucked off the tax-free money guys like you (and me) provided, and likely bought their home in a bidding war, forcing prices higher. Bad outcome. Now more Canadians have financing worth over 80% of their home values than Americans had before the big crash.

So, buddy, back off. The goal of a caring politician isn’t to shoehorn more people into debt and bad decisions, just because they want it. Instead, your role is to lead, to stand up for common sense, and battle the forces of cheap expediency and sleazy solutions.

Allowing individuals to use pre-tax dollars to buy a levered investment 20:1 has created enormous amounts of paper wealth in this country.

The only problem is it too heavily favours one industry, at the direct expense of all others and I’m surprised they haven’t caught on. Why haven’t car companies lobbied to have RRSPs raided for first time car buyers?

Those who see the threats however are usually relegated to blog duties and those with any influence are too busy trying to secure campaign donations to care.

What is he thinking? The Aussie housing market (like Canada’s) is already in danger territory…I guess this policy could win him some votes from horny, moist virgins…forget the goat, the lambkins are going to slaughtered.

Great post. Hopefully Xenophon takes note and listens as he has been copping a lot of negative press around this issue in local media also. Certainly not helped by him owning multiple investment properties which would be sure to benefit from such a scheme:

Australia has already tried the deposit boosting trick to improve housing affordability in 2008/2009 when they introduced the First Home Owners Boost (which was in addition to the existing First Home Owners Grant) which pulled forward demand, sending prices higher (as FHBs leveraged the deposit to compete against each other) and worsening affordability. Now with First Home Buyer demand waning again he wants to pull the same stunt? Rethink it Xenophon.

Well, remembrances aside, Garth your advice was spot on.
Nobody should be raiding their tax deferred, or tax free savings for a stupid place to pee, sleep, and raise a family.

The chances are you might get old someday, or become disabled before you planned to retire. You could croak off sooner than your actuarial date, like the 23 year old neighbor who was testing, and driving after he left the local pub late Saturday night. Whether legally drunk, or merely on his way, the tragic result of not watching where one is going was the same…no more texts… EVER!!

While we never know what the morrow brings, plan for tomorrow, you might just be there unless you text & drive.

You might never own a home, and that would not be so bad. At least you would be old with cash for choices, not house poor with piddly savings. While a mortgage can be a long time, life is even longer. live it well, piss off your friends!

The government can’t be held responsible for first time buyers over extending there budgets. People will find a way to shoot themselves in the foot if you let them. The home-buyers plan is a valuable tool that can be used responsibly to purchase a first home. Let people decide themselves what to spend their investment dollars on, even though I agree that the current prices are insane in many canadian markets.

Thanks Garth..have sent this along to my Aussie rellies.
Rampant RE spec has been going on Downunder for many years now.
They have no CPP equivalent, OA pension is means tested, and what they call Supers are a nightmare mishmash of hundreds of plans. However, things are different there!

@#3 Randy
( ironic name for one who is pontificating about beastality)
Goat fondling? I think there are a few million Scottish and New Zealand sheep that may disagree with you.
But they’re not halal so they’re safe……… :)

I borrowed from my RRSP 10 years ago, and it will be all paid back next year (2014 tax return). We sold the house last fall for almost double what we paid, and then bought a condo cash and clear, and put the rest in RRSP and Tax Free savings account. It can work if people are mature and think things through. Today, we have kidults into their 30’s who are not just house horny, but pure hedonists. And this my friends is the problem. You may as well just sit back and watch the show.

That’s a great message to Nick the Aussie Senator Garth. I will be surprised if he listens to you though even though he absolutely should. I was in Australia 11 years ago for 3 months, and to me and my traveling partners observations, the Australians make the Americans look quiet and humble.

I think there were plenty of positive results from the Home Buyers Plan. You just had to have not been a homeowner for 10 yrs. Repeat failures got a second chance because in a boom or bust place like Canada, you don’t want the austerity, survival, sales types, never getting back in. That was the thinking and if they have a real estate property, they are probably as well off as if they had a G.I.C. in an R.R.S.P. I fail to see at what point in history a Canadian political party, ever got elected on affordable housing.

Couldn’t agree more. Harper will pull out all the stops to keep this gas bag floating leading up to the next election. Then, regardless who forms the next government, watch out below, especially in the frothiest markets. (Van. & TO I’m lookin’ at you). Bread and circuses will continue until then.

I just don’t get it?? Are people so out of touch with economic reality these days? Are they so blind to the obvious? Why is the concept that when you make credit and “Free” money easier and easier to acquire, the cost of goods gets more expensive??

Hey Nick, guess what, when you make it harder for people to get cheap and easy credit, when you make it harder for people to get a deposit to purchase a house guess what…………PRICES GO DOWN AND HOUSES BECOME MORE AFFORDABLE. When you have a population that cannot afford grossly overpriced houses and you don’t give them the means to pay those overly exorbitant prices……again, guess what, the prices go down.

“All 39 Australian housing markets surveyed were “seriously” or “severely” unaffordable, defined as having average house prices more than four times average income.” and “Australia had the second-worst housing affordability in the world”.

Am I reading this right? Four times average income is “severely” unaffordable! Cripes …Where does that put Canada? The one and a half worst housing affordable in the world?

I’ve noticed asking prices in my Ottawa neighbourhood drop by 20% in the last year and people still think the market is HOT! Enough of this propaganda already! The information age is making people stupid!

#138 Mark on 08.06.14 at 6:26 pm…
…”Sure. But a portion of that is to pay for fixed infrastructure. At some point, if enough people start self-generation, the tariff will have to change to a fixed infrastructure fee + wholesale cost of generation. At Palo Verdes, a commonly used reference price in Arizona, around $30-40 per megawatt hour on average.
==================================
Mark, Mark, Mark; this is really silly!

Our Utility has utilized an infrastructure fee + wholesale cost of generation in its billing for quite some time now… You’re behind the times! Most of the Electric Co-op utilities in Arizona buy their power wholesale from somebody else, and those costs are rising.

As for “Palo Verdes”, you’re perhaps referring to the “Palo Verde” nuclear generating station at Tonopah, AZ? The only “Palo Verdes” I’m aware of is in California.

The Tonopah nuclear plant is not at all used as a general reference price for all of Arizona, where most of the plants are run on natural gas. It is rather an exception to the gas/coal/wind/geothermal, solar etc. plants dotting the state.

Really happy to see this get some intelligent unbiased coverage. It’s a pathetic ploy to keep the ridiculous prices in Sydney and Melbourne propped up for people like Xenaphon with vested interests who own 8 properties themselves.

6 years I believed a house price correction was right around the corner. No sign of one yet. What will be the catalyst? Interest rate hike, the boomers selling or a combination of both? Which leads to the next question of; when are the rates going to rise? Next year? Year after that? When are the boomers going to unload their houses? 2 years? 5 years? Never because they can’t afford to retire..? So in 1-3 years we will have a correction of 10-15%… Wow,That’s amazing… It’s still going to be unaffordable! Even if it’s 700k and a 15% correction happens and the house is 105k cheaper, it’s still unaffordable. Especially since rates will be higher. If you live outside of GTA and Van city it will be good, but in those two cities, I think you just have to accept that you’re screwed.
A 30% correction in the US carved $6 trillion from the middle class, precipitated a global recession and permanently injured the finances of millions. I would not underestimate the consequences of a correction here, of any magnitude. — Garth

nick : if you have an ounce of sense you will back off and tell everyone ‘I made a mistake. Its a really bad idea’
and you better unload those properties mate…. it wont take much to pop your housing bubble.

“Our Utility has utilized an infrastructure fee + wholesale cost of generation in its billing for quite some time now… You’re behind the times! Most of the Electric Co-op utilities in Arizona buy their power wholesale from somebody else, and those costs are rising. “

And they buy at wholesale, 240kV or 500kV, for $30-$40/megawatt hour on average. The reason why it gets marked up to $135/megawatt hour (13.5c/kw-hour) is to pay for the fixed infrastructure, transformers, etc. involved with such.

Now, if people, on any significant basis use solar panels, and keep the ‘grid’ around as a backup, the grid still has to be paid for. The gap between the $135/MW-hour they sell at, and the $30-$40/MW-hour they buy at represents money paid to build real infrastructure, maintain that real infrastructure, etc. All of which does not magically disappear because you happen to have solar panels pumping out a megawatt-hour a month on the sunny days.

And yes, the Palo Verde switch yard (500kV) is co-located with a 3-unit nuclear power plant of the same namesake. Real-time and average pricing at the proverbial “Palo Verde” bus-bar is used as a reference point for pricing various financial contracts and risk management products on electricity in Arizona.

“6 years I believed a house price correction was right around the corner. No sign of one yet”

Have you been asleep for the past year? Prices have been falling in most Canadian centres, although only a few percentage points at best thus far. The stock market, heck, even financial assets like GICs and bonds, are starting to outperform housing, and all the evidence is that such will continue for a long time to come.

FIXED…
A 30% correction in the US carved $6 TRILLION from the middle class, precipitated a global recession and permanently injured the finances of millions. I would not underestimate the consequences of a correction here, of any magnitude. — Garth

Yes, it’s basic economics. When the supply of money increases (as when interest rates are low) people have more money to spend, which drives up demand, and thus prices. This is classic inflation: more money = higher prices.

Therefore, changing the rules to allow people to access money they could not access before, effectively increases the money supply (if only in one sector).

The problem is not so much that the money is available. It’s the change in the rules that causes the problem. Like so many government fiscal and monetary policies, constantly changing the rules distorts the market and results in poor allocation of capital.

Cheap money creates the illusion of affordability, but the reduction in the debt service costs is off-set by the increase in price.

In other words, people shoot themselves in both feet because 1) they are apt to take on more debt than they would otherwise, and; 2) their own fiscal imprudence drives up prices.

We have seen the enemy, and it is us. Plus all the tools who wittingly or otherwise help drive more money into the coffers of the banks to the detriment of the people.

Perhaps not for domestic use, but as a means of settling imbalances in international trade, there’s a very high probability of such occurring. The US dollar serves the role today, but its on awfully shaky ground.

The highest electricity generating costs come from the need for the electric companies to meet short periods of peak demand.

Utilities must have the capacity to satisfy those short periods of peak demand, but because electricity cannot feasibly be stored, it must all be generated on a on-demand basis. Having the capacity to satisfy the short-term spikes is very costly.

In the past, only industrial customers were charged a hefty premium for peak demand (by exceeding a set threshold), while home owners basically paid a blended flat rate. But now they charge everyone based on time of use. I guess they figured out they can make more money that way.

In fact, building out new infrastructure is so costly that governments are attempting to delay same by devising such hair-brained schemes as Feed In Tariff programs, which pay people insane per-KWh rates to generate electricity using wind and solar.

“The highest electricity generating costs come from the need for the electric companies to meet short periods of peak demand. “

Sure. And solar panels are entirely unpredictable and neither are dispatchable nor qualify as ‘spinning reserves’. For the same reasons, they do not meaningfully relieve transmission line infrastructure requirements either.

At best, the only advantage solar power has to sites that already have a grid interconnection is a reduction in line losses.

“In fact, building out new infrastructure is so costly that governments are attempting to delay same by devising such hair-brained schemes as Feed In Tariff programs, which pay people insane per-KWh rates to generate electricity using wind and solar.”

No, the purpose of those programs is mainly to appease their supporter base, typical left-ist types. Most are not economic by any stretch once the subsidies, explicit and implicit are removed. Do you really think its prudent to base a business plan on subsidies from heavily indebted governments existing forever? Sounds just as wise as the folks who think that CMHC will be able to underwrite enough subprime loan guarantees to keep the Canadian housing market forever levitated.

Have you considered that the model for utility pricing might be a relic of the industrial revolution and is ripe for change?

Why should maintenance costs of the generating plant and distribution system be based on the consumption of the user? With this wasteful model, utilities need ever increasing customer consumption to thrive. This worked great well up until about 15 years ago as households geared up with evermore electric gadgets.

Now we are seeing the exodus of high power user industries to low cost manufacturing countries and the advent of high efficiency lighting, appliances and motors in residential customers. This is creating a perfect excess capacity storm for the hydro companies in the same way that flat water consumption is causing headaches for the water works.

Green energy is not the problem. Old monolithic pricing policies are what needs to be rethought to maintain the grid and keep the lights on.

Bound to be the backbone of currencies sooner than later. And if all else fails you can eat them.

House in my hood listed for $4m. Dropped to $3.6M. Will take an offer just North of $3M. Probably all in around 2.8M to build the thing (if you could find a similar lot). The guy selling it is stinky rich. He can’t believe how the market has cooled down.

Another house around here sold for 1.25M two years ago…cannot get 1.15M for the exact same house (next lot over, same developer, no known liabilities) since last Feb.

Of course, my sister in law put a piece of junk up for $450K, had 21 offers and sold for $35 above list…no inspection…vermiculite abounds…

Patience…even in Cowtown things are slowing down. It’s the 450-700K “starter” home that are still heated.

Mark. Please get this, will you? I’m not “off” the grid. ; I depend on it! The grid is my customer!

Of course, the grid doesn’t disappear! It is never there simply as a “back-up” as you suggest! I am on the grid 24/7, 12 months a year, unless of course the grid goes down, in which case, so do I. I cannot produce into a vacuum.

I’m on the grid; as both a consumer and a in my case, more importantly, as a producer. I depend upon it! I have the best of both worlds; I can consume (buy) off the grid whenever necessary and produce (sell) to the grid if my production exceeds my consumption.

The bottom line in all of this, which you seem to be missing, or conveniently avoiding, is that my system is cost effective in an environment of rising costs.

My annualized ROI, based on my guaranteed (conservative/minimum, call it what you will) production is 12.38% with a 8.8 year maximum payback. As I demonstrated earlier, we are running at least 8% above those conservative projections.

Before we put this system in, we questioned and grilled many producers in out community, and got the scoop “right from the horses’ mouths” (with apologies to my neighbors). Their electric billings were all I needed to examine for the viability of the local electric co-op’s program. I asked similar questions about solar contractors, and went away with 4 recommendations…

And here we are. I love the concept of a 12.38% GUARANTEED ROI. I’m sometimes open to greed and I like that. 12.38% or better? WTF is wrong with that?

On another level, I love the concept of so far having offset, during this short few months, the same amount of CO2 as the planting of 99 trees. All the while saving/making money… oops… there I go again.

Sorry you don’t get it, Mark. I’m even more saddened that you continue to throw out these red herrings, straw men, previously discredited arguments, irrelevant and far off-topic non-issues.

I can’t say for sure, but I think I just might have been trading equities and derivatives when you were still a twinkle in your daddy’s eye. I didn’t put this system in because I needed to, Mark. I put it in because, after a lot of number crunching, it made good sense.

I trade and manage my life from facts, Mark. Scientific facts and empirical data. I don’t let my emotions or my ideology drive me away from that discipline, because years ago, I made a lot of very bad, silly moves when I let those things interfere…

Many years ago, in the late 90’s, I borrowed about $11,000 from my RRSP to buy my first house, which was about all I had in the RRSP at the time. I also maxed out the CMHC thing which at the time would only cover $175,000. Hard to think now, that wouldn’t buy a condo.

Then my wife divorced me and took the house. Somehow, I think the government lost the paperwork because I don’t recall ever paying the money back into the RRSP, although I have many times that in there now. Or maybe they transferred the obligation to her since she had the house. I have no idea. Anyway I didn’t have the house anymore and they stopped asking. Or maybe I paid it back and forgot. Anyway, like I said I have many times more in there now and it would be below accounting thresholds to revisit the issue.

Anyway, what I am really interested in is how the Amazon ladies are coping with your leg and how that is going. I mean there must be some message positions that have been uncomfortable. How are the ladies holding out? And have you had the Harley fitted with hand levers? Are the Amazons driving you around in the Hummer?

@Smudgekin, post #26:
Yes, lots of automotive sector jobs will be lost as Ford, Holden (GM), and Toyota pull out of Australia. Why? Just like in Canada, the high cost of housing drives up the cost of doing business there. The only long term sustainable way to make housing more affordable is for people to have good, well paying jobs rather than an unsustainable rob the future to pay inflated prices now Ponzi scheme.

“Why should maintenance costs of the generating plant and distribution system be based on the consumption of the user? “

If you’ve followed my comments, I agreed whole-heartedly — the very simplistic electricity pricing model is broken by those who effectively ‘free ride’ on all of the investment in infrastructure who are allowed to displace fully-infrastructure-burdened power with their own production.

Once you actually go to use wholesale electricity costs and add on a component for pro rata infrastructure (relied upon as backup), the numbers for solar panels are completely uneconomic as I pointed out earlier.

“And here we are. I love the concept of a 12.38% GUARANTEED ROI. I’m sometimes open to greed and I like that. 12.38% or better? WTF is wrong with that?”

Its not guaranteed as it relies upon giant subsidies and an unsustainable pricing model for infrastructure that you’re effectively free-riding on. And even at that, a 12% ROI isn’t impressive at all. Sure, if you can afford it, and want to feel that you’re ‘saving the Earth’, its a good hobby. But when you look at the full cycles of internal and external expense, and the heavy reliance on subsidy, your solar panels are not a good investment.

#67How do these Canadians afford these houses? on 08.06.14 at 10:34 pm

How do these Canadians afford these million dollar homes? Is it a result of big government pensions, 0% interest rates, parents choice, or a sugar daddy/ sugar mommy funding part of the downpayment?

Just the other day someone bid over 250,000$ over asking price for a 3 story house in one of those cul-de-sacs at midtown Yonge street.

Went to the sit of a big Canadian bank to see how much they would lend me. Wow. You guys are screwed. So screwed. Hilarious amount. No way would I ever have imagined it would be that much. No way would I borrow that much. Madness.

A mumber of blog dogs have drawn attention to the syndication of dubious auto loans. US authorities share these concerns. One possible impact is a slump in domestic auto sales which are being effectively front end loaded.

“And solar panels are entirely unpredictable and neither are dispatchable nor qualify as ‘spinning reserves’. For the same reasons, they do not meaningfully relieve transmission line infrastructure requirements either.”

Right. No sunny. No money. However, think about this: PVs work best when the sun is strongest, and that’s exactly when extra capacity is needed most (e.g. hot, sunny, summer days).

———————-

“At best, the only advantage solar power has to sites that already have a grid interconnection is a reduction in line losses.”

Interesting…

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“No, the purpose of those programs is mainly to appease their supporter base, typical left-ist types.”

Not sure I agree with that one. Though, I would not be surprised if there were other motives that I am just not privy to. ;)

—————–

“Most are not economic by any stretch once the subsidies, explicit and implicit are removed. Do you really think its prudent to base a business plan on subsidies from heavily indebted governments existing forever?”

That’s just one of the many reasons I did not go for a MicroFIT installation myself. But don’t forget, governments don’t typically think long term. If they can dampen prices while they are in power, they would likely do it, even it means their polices and programs cause much higher prices down the road. If ‘successful’ the current government won’t get the blame. So the whole thing might just be a delay tactic (?)

I once considered a rooftop solar installation for my home under the MicroFIT program in Ontario. At the time, they were paying something like 83¢/kWh. The installers love to claim ROI’s of about 10%-15% (at least last time I checked).

However, after running the numbers (which involved a great many inputs), the projected real ROI was only about 1.5%. And that did not include potential repairs to damaged solar panels or replacement of worn out parts (which are basically unknown). And even some maintenance costs were difficult to nail down, so the ROI I calculated is actually something of a best-case scenario at only 2.5% inflation.

After I decided to forgo this ‘opportunity’ the government cut the pay rate to around 60¢/kWh. Making the ROI even worse. And remember, a PV installation is not like real estate, which generally appreciates in value. At the end of the contract your PV installation will likely be worth nothing due to wear and tear, diminished efficiency, and technological obsolescence.

Now, under the MircoFIT program, the power you generate does not go toward off-setting your own grid consumption. You use the grid just like anybody else. You simply get paid for whatever electricity you generate.

“Right. No sunny. No money. However, think about this: PVs work best when the sun is strongest, and that’s exactly when extra capacity is needed most (e.g. hot, sunny, summer days).”

Sure, but when the clouds on those hot/humid/muggy days a’rise, the air conditioners are a’blowin at full blast, ultimately those solar panels need to be backed up with additional capacity. Usually very expensive rapidly dispatchable simple-cycle gas turbine sets.

I guess, hysterics aside, the point I’m trying to make is that solar panel economics should be more properly using long-term wholesale pricing as the reference, with a discount for the lack of dispatch ability, spinning reserve capability, and some other technical aspects such as reactive power creation. The people who have based their business plans on pie-in-the-sky subsidized prices are in for an eventual rude awakening. Much like a giant swath of Canadian employment is now based on supplying housing, an industry which has been severely over-stimulated through the CMHC’s $900B in subprime guarantees and will create huge job losses for many years to come as the Canadian RE bubble continues to pop.

Not sure what you guys are on about but if you dry camp in an RV an 80 – 160 watt solar panel will keep the generator in storage most of the time. Ya, you still need the generator. But a single tank of gas can last all summer with that panel. Assuming no air-conditioning. If you turn that thing on bring a jerry can a day of gas.

I personally have 2 130 watt panels on my RV. 2 is a waste. Only get 1. If you have 2 you don’t have enough battery to absorb the charge (I have 2 golf cart batteries 6v in series, 200 AH), but if there is no sun or you are under a tree 40 panels wouldn’t be enough. Bright sun on one panel or crack out the generator. Learn from my mistakes.

But when the sun is shining I make a lot less noise than my fellow campers. We can charge our iPhones, run computers, we even have an energy efficient 24 inch TV and it all works off the panels. But for god sakes if you want to use a generator get an inverter style.

Also another reason solar panels are better than generators for a 12v system. You can’t charge a battery like filling a gas tank. It takes time. You run that generator for 2 hours, if you got an old trailer you are putting 5 amps into the battery. Great. You’ve got yourself 10 amp hours. Means dick. The solar panel puts in 5 amps all day so you might under ideal conditions get 50 amp hours.

Oh and no that 42 inch plasma tv that came with the RV won’t work if you aren’t plugged in or running the generator. That sucker need 150 watts, or over 12 amps to run off the inverter. So if you have an 80 amp-hour battery and they don’t work good after 50% drained, well you have 3 hours if you don’t use anything else including the lights and the water pump. Swap it out for a small LDC tv using 30 watts or so.

What I’ve learned from camping is that going solar is all about the batteries and the load.

– no, you cannot run the air conditioner, the coffee pot or the hair dryer. No you can not.

– Colman sells a coffee pot that goes on your propane stove though. To my knowledge they do not sell air conditioners or hair dryers.

– small inverters from Canadian Tire or other retailers will charge your phone or run your small LDC TV. I have a 700 watt inverter from Radio Shack and it’s served us well for several years and I paid like $150 on sale.

– We also have a number of plug in 75 watt inverters from Canadian Tire regularly $30 we got for $14. Sale.

– Put 12 volt outlets of the type you can buy at Canadian Tire in strategic locations around the trailer. I mean the type that offer 2 12 volt plugs and 2 USB chargers. For some reason they don’t install this stuff, but I just wired it to the nearest 12V light myself.

– Laptops, iPads, iPhones, phones in general, are not a worry. They are already energy efficient because they are designed to run off small batteries. Charge at will. You need an inverter or a USB charger though.

– Get a frickin suitcase inverter style generator if you want to use a generator. The rest of you sound like lawnmowers and you are hardly charging the batteries. They aren’t much more money anymore and they use less fuel.

– For things like TV’s and sound systems, look at the wattage they consume. A big plasma will kill your batteries. A small LDC provides hours of entertainment for the kids when it’s raining.

– Swap out the incandescent lights for LDC’s. Not all of them, too expensive, but do swap out the ones that are on the most.

ahhhhhh but politicians have so much better Press coverage……I think it might have something to do with the fart catchers in the MSM.
Trust me. I’m right about this.
I’m an expert when it come to fartz.

Hello, Mr. Turner. In case no one has posted it between your bedtime and my comment, I wanted to mention that although he hasn’t directly responded, Mr. Xenophon has put a link on his site to an Australian article about today’s post.

Be forewarned, the comments section does contain some of the colourful, peppery language that we know and love from Australians.

One more thing, Mr. Turner. Macrobusiness has quoted your article, verbatim, in its entirety. This includes the statement “And, of course, we both fondle goats”, but without the pertinent photograph. You may want to leave a comment on their site, explaining the statement, just to salvage whatever reputation Canadians may still have with the Australian public.

It’s beyond me how you needed to put this into effect before you learned this lesson. Politicians have such a poor understanding of basic economics it’s tragic.

I think Garth had a good grasp of economics at the time, but poor grasp of politics. A temporary plan to buy votes of young people that costs the government nothing, increases house prices and fuels the wealth effect? Temporary? Really? Did the guys who proposed this keep a straight face long enough to get past the admin assistant?

If solar power was such a great idea, everyone (who matters) would be doing it. But they are not, and there is a reason for it. It is still a highly experimental field in its infancy. Solar panels are, like ‘green cars’ not green at all, have atrocious efficiency, which plunges to near zero very quickly over their surprisingly short life spans. The entire industry survives on government subsidies. Government needs to gtfo of this industry, instead of forcing it down everyone’s throats. When it is economically feasible and sustainable, it will take off like a rocket on its own, and not a second before then.

Garth, how could I not respond to todays blog. Being a South Australian and of course a long time reader.

Long term Blog dogs would remember my almost daily comments on the blog. With a change to my circumstances, limiting the time spent on the net I still find time to read your posts on a daily basis.

Nick means well I do support his anti gambling stance and many of his other positions. However he has this first home owner idea completely wrong.

It is also important to note that Nick has several investment properties and takes full advantage of our crazy negative gearing tax system here in Australia.

The question that needs to be asked is are there any politicians who might support lower house prices and if not why?.

Perhaps this might explain why the political class are so reluctant to change the current situation.

The conflict of interest killing housing reform

Can Australians expect sensible housing reform when politicians have so much skin in the game? Or will self-interest continue to make Australian housing increasingly unaffordable for younger Australians?

Last week Independent Senator Nick Xenophon announced a plan to let first home buyers access their superannuation savings to pay for a housing deposit. His stated intention was to improve housing affordability, but by boosting housing demand, his plan would mainly benefit existing home owners and investors (A worrisome debt trap for first home buyers, July 29). Real estate agents and property developers would also be big winners.

If passed, Xenophon’s plan would be a continuation of decades of housing policy that has boosted prices but failed to increase home ownership or improve housing affordability. It would follow in the footsteps of negative gearing, the capital gains tax concession and the first home owner grant: three policies that have contributed to some of the most unaffordable real estate in the world.

But the question is why? Are our politicians simply ignorant? Are they naïve to the effects that these policies have on house prices and affordability? Or is there something more despicable going on?

Recent work by housing researchers Paul Egan and Philip Soos and former strategy consultant Lindsay David (whose previous work I touched upon here), assesses the housing assets held by Australian politicians.

In 2013, the 226 members of parliament (150 in the House of Representatives and 76 in the Senate) owned 563 properties (an average of around 2.5 properties per member), which the researchers value at around $300 million.

The Coalition and Labor Party agree on little but they are a united ticket on property investment. Around 91 per cent of all Senators own real estate, while 95 per cent of members in the House of Representatives own property. Both numbers greatly exceed property ownership among the general public.

I read your post on our Senator Nick Xenophon with interest; he wants to establish the Australian version of the Canadian scheme.

Yesterday, along with two colleagues, I released research into the property holdings of Australian federal politicians, which amounts to an estimated (and conservative) $300 million, with 226 politicians owning 563 properties. This conflict of interest obviously makes it difficult for genuine housing reform to be enacted.

The research went absolutely viral, we’ve never had such a response to any of our writings. It turns out that these property-laden politicians make a lot of people angry.

Australia is following Canada down the same path, and it is widely known how those in Government have a vested interest in propping up the ponzi.
There are so many industries in Aussie Land that have a vested interest in Real Estate I can’t see it ever collapsing.

The unemployment figures were released today and they were shockers – all heading North.

Rumour has it that there will be another rate cut before the end of the year.

“Canada Revenue Agency stats found almost half (47%) of the borrowers who raided their RRSPs haven’t paid anything back. So the missed payments are added to their incomes and taxed.”

Yikes….and not even taking into account the current year’s missed contribution. I wonder what the total percentage would then be?

Retirement savings, personal savings and re should be long-term and ideally, real-time parallel investments for diversification- not hijacked into a single pot. Borrowing has gone completely insane in Canada.

I really wish politicians would stop using words they don’t understand. They can be very dangerous, because we then end up with millions of old people eating date-expired crap from the dusty rear aisles of discount shops.

Leveraged Loans Are Increasing and With Higher Leverage, Causing Concerns Among Regulators (OCC Graph Released in June 2014)

the “business model” UN changed
…”In 1929 National City Bank made bad loans and packaged them up as securities and sold them to unwary investors. Last month, Citigroup paid a $7 billion fine for making bad loans and packaging them up as securities and selling them to unwary investors.”

Citigroup Offers Five Times Leverage to Bank Depositors to Trade in Foreign Currencies

Interesting; house rentals on kijiji in Edmonton as recently as 6 weeks ago used to be fairly even – offering vs. wanted at 1100-1300, depending on the time of month. As of today, there are over 1500 houses being offered, 450 more than are wanted. They must not be selling……. funny, the EREB never mentioned.

Solar panels are fairly resilient. If one gets knocked out by a bird which has become petrified and lost its sense of direction, you have purchased insurance for them, and it is not costly.

“…or replacement of worn out parts (which are basically unknown).”

The panels have no moving parts to wear out. The inverters are warrantied for 15 years in most cases, so what’s unknown?

“After I decided to forgo this ‘opportunity’ the government cut the pay rate to around 60¢/kWh. Making the ROI even worse.”

The Ontario government has cut the rate because the price of panels has continued to fall dramatically.

“At the end of the contract your PV installation will likely be worth nothing due to wear and tear, diminished efficiency, and technological obsolescence.”

In twenty years’ time, the solar panels will have become about 10% less efficient. They will still produce. You’re likely right about their being obsolete in comparison with new panels, but they will still produce electricity, and thus still have some value.

All we need to know about you is this statement you made: “…not like real estate, which generally appreciates in value.” Buy a new house and neglect to replace the electrical fixtures, plumbing fixtures, siding, shingles, water heater, furnace, flooring, cabinets, paint, windows, or anything else. Come back in twenty years and tell us how much the building has appreciated.

Many (including Nick, it seems) have no respect or appreciation for the free market. The best solution to high house prices is high house prices. The market is self-correcting. No need to tinker, that just makes things worse.

Hope you can help me with a article that Garth posted a while back. I had it bookmarked but lost them, and I have tried a search but have come up empty so I’m hoping to make use of the HiveMind.

His article was about:
-how the less than 100K worth group starts out investing (I know he has a ‘breakdown of portfolio’ about once every week, but I mean the “first step: get your money out of mutual funds; second step: get a fee-based advisor” instructions of a particular article I’m thinking of)
-how one might select a fee-based advisor for this level of investing
-next steps after the 100K gets to the ‘next level’

If you happen to notice a cigarette butt in a gutter, don’t be too quick to scorn it as disgusting and useless.

Well, yes, it’s still disgusting, but a team of South Korean scientists says it’s no longer useless. In fact, they’ve used the butts to create a material that could store energy in superconductors for use in all manner of devices from computers to electric cars.

The stuff of cigarette filters, in fact, offers better performance than the substances already available for use in superconductors, such as carbon nanotubes and graphene, according to their findings published Aug. 5 in the Institute of Physics’ journal Nanotechnology.

http://blog.australiaboomtobust.com/2014/08/propertied-federal-political-class/ – “The public should ask “Are the property holdings of our federal politicians negatively influencing policy and causing them to ignore evidence?” The parliamentary register of members’ interests may help to answer this question [] It is evident that politicians are heavily invested in the property game, with the 226 members in both houses of parliament with an ownership stake in a total of 563 properties []” Has anyone obtained similar data for Canadian politicians?

A 30% correction in the US carved $6 trillion from the middle class, precipitated a global recession and permanently injured the finances of millions. I would not underestimate the consequences of a correction here, of any magnitude. — Garth

I would be more worried if you didn’t own a house albeit a minor short term price correction that may be coming. Stop being the doom and gloom guy a la Farber.

“They can be very dangerous, because we then end up with millions of old people eating date-expired crap from the dusty rear aisles of discount shops.”

As opposed to what? The millions of young people who have to do the same today, despite being able to work, but not allowed to work because the economy isn’t churning out sufficient jobs to keep up with population growth?

The extreme unemployment problem is one of the reasons, amongst many, why policy rates are going to remain low for at least years to come.

A friend of mine (RIP) was a young Tory MP, and told me that it was very common to, as soon as he and his colleagues got elected in Ottawa, use their housing allowance to make payments on a condo out there.

Not sure how many did so, but the way he spoke, it was quite a common practice, for MP’s from Western Canada to purchase housing in Ottawa and fund the mortgage with their housing/living out allowance.

#127rosie "moving forward" in the knowledge that, "this won't end well" on 08.07.14 at 12:49 pm

#51 Smoking Man on 08.06.14 at 9:38 pm
JimH only reason I was asking about Bullhead Az
Be down in your neck of the woods, Aug24 to Aug 28
Being a budding pilot you are, there is a place on Narada, that rent out Extra300 we can dog fight each other…
About 600 bucks, only draw back, we got to take one of there pilots with us.
You in…
______________________________________________
Been there done that a few years ago Smoking Man, did it at Sky Combat Ace in Las Vegas. It was the Top Gun Experienece. I was semi bored though as they won’t let you take off or land the aircraft. I was IFR rated once when I was in the USAF back in the eraly 70’s. Have fun its not like flying a C-5 or a C-141. I once got the opportunity to take a F-4 Phantom up for some rides from one base to another in Vietnam. That was very cool.
Cheers

#132 Smoking Man on 08.07.14 at 1:24 pm
#122 Holy Crap Wheres The Tylenol on 08.07.14 at 12:
This one is for Smoking Man, please join.http://ufocontact.com/
I’m the guest of honor…
_____________________________________________

Have a friend who once had a close encounters of the Third Kind out in Alberta. Swears on his mothers grave it happened. Still good friends with him, smart guy too.
He is a real estate investor with tons of loot. We are talking tens of millions, so he can’t be that nuts.

senator Patrick Brazeau has until Friday to leave his Gatineau, Que., home and hand the keys over to his bank.

The bank is trying to recoup $189,778.18, which is the amount left on Brazeau’s mortgage, as well as an additional $11,237.54 from another loan. According to the city of Gatineau, the home is valued at $240,300.

hmm, I think this supports Garth’s contention that housing is hurt’n dans la belle province. I mean if you owe $190,000 and the house is worth $240,000 why not just sell and get out? I’m guessing the house is worth $190,000 and Patrick would have to write a cheque for $20,000. Which he doesn’t have.

Thats the way to show us Russia just who you are!
Way to go Putin!
vee no import goot food from vest nomore, now Russia eat only Russian food from Chernobyl!
Da Chernobyl tomatoes glow in dark, easy to find!

Its a very highly technical aspect of the power system/electrical engineering, referring to current which flows between capacitive and inductive elements of the system, but does not actually contribute to physical work or heat creation.

Typically in a power system, it is used as a measure of ‘voltage support’, and much of a power systems’ reactive power requirements are created by turbine generators by varying synchronous generator excitation by way of an AVR.

It is because of reactive power that you can’t, in doing AC power calculations, simply go P = IV. You have to use phasors, and the heavy duty mathematics thus involved.

That’s the first year EE course version of it. To get more into it, I suggest you Google for additional resources.

To make a long story short, reactive power is, just like those other aspects we discussed, not really a characteristic of solar energy production. Thus lowering its value and requiring supplemental resources as backup.

Granted, he maybe self-made. But, how would you like to see your investment portfolio perform?

Give them bread, circuses, and please! Just give them their Superannuation money (retirement/pension plans called elsewhere). Don’t legislate contrary to stupidity, don’t bother protecting people from themselves.

It’s like a switch got flipped on the markets last Thursday, when we experienced the first significant drop in equities. It seemed obvious that something had changed. It has been basically straight down since then and accelerating.

Markets never behaved like this back in the ninties and eighties, meaning straight up all asset classes followed y straight down all asset classes. Correlation on the way up and down is highest ever.

Just weird.

The Dow is off today 0.46%. Very scary. I guess you’ll wait for the bottom of the correction and bail, right?– Garth

Holy Crap Wheres The Tylenol on 08.07.14 at 1:32 pmHave a friend who once had a close encounters of the Third Kind out in Alberta. Swears on his mothers grave it happened. Still good friends with him, smart guy too.
He is a real estate investor with tons of loot. We are talking tens of millions, so he can’t be that nuts.
………….

Did you visit that Web side… Tonight just for you, on my blog… Re et.

Few excerpts from my fiction novel… Now if I called it a biography, them men in white coats will show up…
At any case you will understand all…

I agree with #24 Joseph, that HBP can work for some folks if they ‘think things through’. Ie, don’t borrow what you can’t pay back. I borrowed $20k in 2000, and will pay it all back in a couple of years. Of course, prices then were not crazy like nowadays, and the price of my first condo was about 3x income (in TO). Paid the mortgage off in 5 years (I was just a few years into my career and my income doubled within 5 years). Now of course, I don’t expect my income to rise much (if at all), and the price of a decent home (now living in Vanc) would be 10x income, so…now I’m renting.

I’m not surprised people aren’t paying back the HBP. The HBP was being used as an interest free loan which didn’t count as a debt. The money was already earmarked for their downpayment.

There’s nothing wrong with taking your $20k, putting it in an RRSP, collecting a fat return, waiting 6 months then buying a house, and returning the taxes to the government for the next 15 years. You’re paying back taxes you would have had to pay anyway.

If it saves you 1% of your house price in CMHC fees, or keeps you out of your credit card for closing costs, it’s worth it.

“Solar panels are fairly resilient. If one gets knocked out […] you have purchased insurance for them, and it is not costly.

” The panels have no moving parts to wear out. The inverters are warrantied for 15 years in most cases, so what’s unknown?

“The Ontario government has cut the rate because the price of panels has continued to fall dramatically.

“In twenty years’ time, the solar panels will have become about 10% less efficient. They will still produce.

“All we need to know about you is this statement you made: “…not like real estate, which generally appreciates in value.” Buy a new house and neglect to replace the electrical fixtures, plumbing fixtures, siding, shingles, water heater, furnace, flooring, cabinets, paint, windows, or anything else. Come back in twenty years and tell us how much the building has appreciated.”

———————–

Hey, R.O., so either you joined the MicorFIT club or you sell PV panels? Whatever works for you, man. I’m not judging.

Not trying to step on anyone’s toes here, just passing on my thoughts and experience.

That said…

My criticisms were of the MicroFIT program, not PV panels or solar energy per se.

So, I realize that the insurance premium would not be much, perhaps around $70/year, at least in my case, for a 10 kW system. However, no only did my ROI calculation not include insurance costs, but it also did not include: maintenance, repairs, inverter replacement, home connection fee, billing fee, monitoring fee (optional), possible building permit, possible roof replacement (if your roof is old at the time of the PV install, it likely makes sense to resurface the roof first).

Now, the reason I did not include these items is because some of them are pithy costs, and some are only probable, except perhaps for the inverters. But IF you did incur a major repair, replacement, removal due to a roofing issue, etc. etc. the costs could really eat into an already low real ROI. And remember, my calculation was based on a lowly 2.5% inflation rate. The actual historical rate over the past, say, 30 years is more like 3%. But a) that’s the CPI, not real inflation; and b) inflation (i.e. reduced purchasing power of money) is likely to be much higher than 3%. Current estimates put it at between 5% and 10%.

And my calculation was based on CASH. Many people borrow the money to join the MicrFIT club, which just makes the ROI that much worse because you’re paying interest to finance a depreciating asset.

As for PV deficiency, I believe your estimate of 10% is low. Most info I have says about 3% just the first year alone, and then about 1% every year after that. If that were true, then over twenty years the efficiency would drop about 22%, not 10%. And the life expectancy of PV panels is only about 25 years, only 5 years longer than a MicroFIT contract. They may last longer, but you can’t count on “ifs and maybes” when calculating ROI–at least I don’t.

As for comparing PV panels to real estate, anyone who knows anything about real estate knows the real value is in the LAND and that any attached structure will, of course, depreciate over time, faster if poorly maintained. One reason I rail against condos, but that’s another story.

Even though I think your deficiency rating of 10% may be low, that’s the figure I actually used in my ROI calculation, potentially making the real ROI even a bit lower than what I originally calculated.

One more thing, Rational Optimist. And this one works in your favour—I do try to be fair…

My ROI calculation was after tax. As a home owner who would have to pay regular income tax on the revenues from MicroFIT, I used an average income tax rate of 30%. So if you look at it from a pre-tax standpoint, the ROI looks somewhat better. About as good as a GIC?

51 Smoking Man on 08.06.14 at 9:38 pm
“… Be down in your neck of the woods, Aug24 to Aug 28
Being a budding pilot you are, there is a place on Narada, that rent out Extra300 we can dog fight each other…
About 600 bucks, only draw back, we got to take one of there pilots with us…”
==================================
Sounds like it would be a real hoot, SM! I’m SOL until late November through mid-April.
Wish I was a “budding” pilot… just a run-of-the-mill “retired” one (SEL, IFR ratings).

[…] find out about developments in the Aussie housing market from Canadian ex-finance-ministers, but Garth Turner ran an interesting piece yesterday about Senator Nick Xenophon’s proposals to make housing “more affordable”. In short, he says […]

It looks to me like the Microfit system as you describe it, is way different from mine. “Now, under the MircoFIT program, the power you generate does not go toward off-setting your own grid consumption. You use the grid just like anybody else. You simply get paid for whatever electricity you generate…”
================================

All the plans I’m familiar with down here (both MO and AZ) are “Net-Metering” plans; plans where your production is simply deducted from your useage; as if the meter ‘runs backwards’ when production>consumption. Yes, any “over production” at the time of the once-a-year and the utility cuts you a check for the juice they bought, but this is only at the reduced rate of $0.035/Kwh. This ‘sale’ is, of course, taxable.

The grant/incentive/tax-credit combinations are set up in conjunction with the local utilities in such a way that projected production is =< projected consumption. That determines the ceiling of the grant/incentive/tax-credit package.

The AZ sun/belt is riddled with residential and commercial solar panel installations. Arizona is not a State heavily populated by "lefties" and "tree-huggers" (well, except MAYBE when the waves of Canadian 'Snowbirds' arrive in the fall to help boost the pop. of greater Phoenix/Mesa by over 11%)! On the contrary… Arizona is a heavily Republican State, and Republicans are not known for their overwhelming support of "lefty" of "tree-hugging" policies. They are much more drawn to ideas that can make/save them money, whether they need it or not!

There are so many roof-top mounted and on-ground (cheaper) installations in Arizona for the simple reason that it makes such good, plain economic sense down here. Ontario? Not so sure about that! Solar PV is best applied in environments south of 40 degrees lat.

There seems to be a lot of confusion about the viability of these systems, even though they have been operating with ever-increasing efficiency and ever declining costs since the 1980's.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.